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With $4.5M from Sigma-Aldrich Deal, Benitec Finds Funds Enough to Run Clinical Trial


About a year and a half after its expressed RNAi technology licensing deal with Promega began to fall apart amid a wave of litigation, Benitec has found a new partner — and significant stake holder — in Sigma-Aldrich.

Through two deals announced this week, Benitec has re-established an avenue for generating revenues by sublicensing its core technology to the research market. More importantly, Sigma-Aldrich will also purchase a $2.5-million equity stake in Benitec, which could prove vital in helping the cash-strapped RNAi firm sponsor an upcoming clinical trial in AIDS lymphoma.

Under the first deal, Sigma-Aldrich has licensed Benitec's expressed RNAi technology — termed DNA-directed RNAi, or ddRNAi — for making and selling research reagents, and also obtained the exclusive right to sublicense the technology, in the human field. In exchange, Sigma-Aldrich paid Benitec $2 million upfront and will make royalty payments based on product sales and sublicense revenues.

Sigma-Aldrich also acquired the right to develop and commercialize products using the ddRNAi technology in the animal and insect fields through a separate licensing arrangement with Australia's Commonwealth Scientific and Industrial Research Organization, but the financial terms of the arrangement were not disclosed. CSIRO owns certain ddRNAi technology rights in areas outside of the human field through a deal with Benitec (see RNAi News, 12/12/2003).

Sara Cunningham, CEO of Benitec, told RNAi News via e-mail this week that the arrangement also gives Sigma-Aldrich the ability to grant freedom-to-operate licenses to other drugmakers. She noted that Benitec retains "all rights to [the technology for] human therapeutics and diagnostics, as well as the ability to do target validation for third parties."

Generating income by out-licensing its expressed RNAi technology for research purposes, while finding a third party to oversee the task, have been key aspects of Benitec's strategy for years. In 2003, the company — then under the guidance of former Chairman and CEO John McKinley — signed on Promega to fill that role. However, a legal dispute over royalty payments eventually led that arrangement to breakdown (see RNAi News, 7/30/2004) as Benitec fought patent-infringement battles with a number of other companies (see RNAi News, 4/2/2004).

Ultimately, McKinley was ousted and Cunningham became CEO with a mandate to settle the company's outstanding litigation and resume the business of drug development (see RNAi News, 1/21/2005).

Since that time, Benitec seemingly has managed to do just that: In August, the company announced that it had resolved a dispute with Promega out of court, enabling Benitec to regain sublicensing rights to the ddRNAi technology and giving Promega a non-exclusive license to use the technology for making and selling research products (see RNAi News, 8/26/2005). Meanwhile, a Benitec patent-infringement lawsuit against rival drugmaker Nucleonics was dismissed by the court, although Nucleonics has said it would file an appeal to force the case (see RNAi News, 10/7/2005).

Now, Benitec has found a replacement for Promega, as well as a large strategic partner, in Sigma-Aldrich.

"Research reagents for us were largely an idle asset — as you know, we have an extensive IP portfolio and a great deal of know-how, but our core focus is therapeutics," Cunningham said in her e-mail. Sigma-Aldrich, "when they decided they wanted to go into RNAi … saw a perfect match in [this] underexploited part of our portfolio."

Though the potential of RNAi has been well-established for some time, Sigma-Aldrich was somewhat slower than its peers in planting its flag in the field.

"Our first move into RNAi was taking a sponsoring position [earlier this year] in [the Broad Institute's] RNAi Consortium," which is a public/private effort designed to create a library of RNAi molecules against virtually all human and mouse genes, Keith Jolliff, director of strategic marketing for molecular biology and functional genomics at Sigma-Aldrich, told RNAi News this week.

"It's unclear at the present time how the market is going to shake out in terms of synthetic RNA versus a DNA-based approach. We have taken the approach that whatever direction a researcher believes is most appropriate for his or her particular research project, we'll be able to meet their needs."

However, after that, Sigma-Aldrich made a series of moves to quickly establish itself as a contender among such big players in the RNAi research field as Fisher Scientific, which acquired Dharmacon early last year (see RNAi News, 2/13/2004), and Invitrogen, which bought Sequitur in late 2003 (see RNAi News, 11/7/2003).

In February, Sigma-Aldrich said it would buy Proligo from Degussa to establish a foothold in the market (see RNAi News, 2/18/2005). Shortly thereafter, it acquired licenses to RNAi-related intellectual property from the Massachusetts Institute of Technology, Alnylam Pharmaceuticals, and Oxford BioMedica, shoring up its IP position for synthetic RNAi technologies.

Now through the deals with Benitec and CSIRO, Sigma-Aldrich has expanded its IP license portfolio to include expressed RNAi, as well.

"It's unclear at the present time how the market is going to shake out in terms of synthetic RNA versus a DNA-based approach" for RNAi, Jolliff said. "My own personal belief is there is a place for both and they'll continue to be strong. So we have taken the approach that whatever direction a researcher believes is most appropriate for his or her particular research project, we'll be able to meet their needs."

Equity Stake

Concurrent with the IP licensing deal, Sigma-Aldrich said it would buy $2.5 million worth of Benitec stock. The company has already purchased 13,507,118 shares of Benitec stock for $1.7 million, and plans to purchase another 6,024,132 for $800,000 once its shareholders approve the sale. The deal values Benitec shares at $0.11 each, the price around which they are currently trading on the Australian Stock Exchange, and gives Sigma-Aldrich a roughly 12.8-percent stake in Benitec based on the roughly 152 million shares of Benitec stock outstanding as of June 30.

Additionally, Sigma-Aldrich has options to purchase another 10,011,643 shares of Benitec stock at about $0.24 a share at any time prior to April 6, 2008.

For Benitec, the equity investment could not have come at a better time. As of June 30, the company had about $4.6 million in cash on hand, with a monthly burn rate of roughly $800,000, giving the company less than six months of cash. And while Benitec's spending is expected to fall with the settlement of its legal issues, the company is not necessarily out of the woods in regards to Nucleonics.

Additionally, the company's stock price has been sliding steadily downward, falling from a 52-week high of Aus$0.66 ($0.49) to Thursday's closing price of Aus$0.145.

Cunningham wrote that the Sigma-Aldrich investment "validates [Benitec] as an investment," which could prove key when the company looks to raise additional capital. Importantly, however, with the $4.5 million from Sigma-Aldrich, it will not need to do so in order to fund a planned clinical trial — Benitec's first — in AIDS lymphoma.

In collaborating with the City of Hope, Benitec is planning a clinical trial that will evaluate its ddRNAi in conjunction with ribozyme and TAR decoy technologies (see RNAi News, 9/3/2004). The study is expected to begin in the first half of 2006.

Jolliff said that Sigma-Aldrich's decision to buy a stake in Benitec would give his company "some foothold into the area of RNAi therapeutics," although drug development isn't currently a focus for Sigma-Aldrich. Benitec "also has a tremendous amount of technical capabilities that we think will benefit us going forward and [the investment] was one of the ways that we could gain access to" that expertise.

When asked to comment about Sigma-Aldrich's possible involvement in RNAi therapeutics, Carl Schrott, director of business development for Sigma-Aldrich, pointed to Sigma-Aldrich's recent deal with Oxford BioMedica, which he said was looking into developing RNAi therapeutics. Under that deal, Sigma-Aldrich acquired the right to sublicense Oxford BioMedica's LentiVector lentiviral-based gene-delivery technology for research purposes, as well as the first rights to negotiate for a license to develop a new range of products based on the technology.

In exchange, Oxford BioMedia received an upfront payment, and will receive minimum annual payments and royalties on sales. Further, Sigma-Aldrich took a $5 million equity position in Oxford BioMedica. Additional terms were not disclosed.

Schratt told RNAi News that while Sigma-Aldrich does not expect to expand "into therapeutics directly," deals like the ones with Benitec and Oxford BioMedica give Sigma-Aldrich "an avenue [providing] access to technology that is developed out of the [therapeutic focus] of both those companies."

"We certainly have not been looking at RNA therapeutics as something that we want to get directly into," Jolliff added. "But at the same time, there is a lot to be offered by these companies. In terms of the technology they develop, I think there will be a lot of research applications … and we will have the opportunity to develop technologies that come out of their research and their efforts to produce therapeutics."

— Doug Macron ([email protected])

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